The federal judge in Connecticut who rejected Bridgeport's bankruptcy petition has also rebuffed the city's plea for continued protection from hostile lawsuits while the bankruptcy decision is being appealed.
In a ruling from the bench Thursday night, Judge Alan H. W. Shiff said Bridgeport attorneys failed to show that an automatic stay on lawsuits, a consequence of Bridgeport's June 6 bankruptcy filing, should continue.
Judge Shiff said the city did not pass four necessary legal tests. The city did not show that without the stay there would be "irreparable harm" to Bridgeport; that continuing the stay would not harm other parties; that the stay would serve the public interest; and that it had a likelihood of success on its appeal.
"The burden of proof was on the city," the judge told a handful of lawyers and reporters after roughly eight hours of testimony Thursday. "And I believe that the city did not sustain that burden of proof."
Judge Shiff's action has exposed Bridgeport to numerous lawsuits, as well as to a court order from a state board. The board, called the Bridgeport Financial Review Board, can now exercise its power to seek a state court order called a writ of mandamus forcing the city to balance its budget.
According to testimony Thursday before Judge Shiff, the board has not yet decided whether to seek a writ of mandamus. Judge Shiff scheduled a hearing for Sept. 19 to decide whether he should re-examine the city's insolvency, so the review board should have at least until Thursday to seek the order.
Last spring, before the city's bankruptcy filing, the review board did seek such an order. The board eventually convinced Bridgeport officials to close a $7 million budget gap by laying off workers, and the order was never used.
City Attorney Barbara Brazzel-Massaro Thursday predicted that the financial review board will take action to force the city to balance its budget, a move she and other officials say will destroy they city's economic base.
"The financial review board is going to meet, and there is going to be a resolution that is going to order the city of Bridgeport to raise taxes or cut services in some manner, and that is really a travesty to the citizens of Bridgeport."
Donald A. Kirshbaum, the board's executive director, said Friday that the board has already given Chairman William J. Cibes Jr. the power to seek a writ of mandamus. But, he added, "He will not do it without at least consulting the board members."
Mr. Kirshbaum said Friday that a meeting of the board had not yet been scheduled for this week, but he also said he expected the board would convene at some point given last week's development.
The board has already passed three resolutions calling on the city to balance its budget either by raising taxes 18%, or using a combination of tax increases, spending cuts and other measures to close the $17 million gap in its $320 million budget this fiscal year. The gap has recently grown by $1 million, because of the elimination of a $30 million state program to fund local road projects.
After June 6, when Mayor Mary C. Moran filed a bankruptcy petition on behalf of her city, the board has been legally barred from seeking a court order to force Bridgeport to raise taxes or cut costs.
Throughout hearings on Bridgeport's bankruptcy petition in July, Mayor Moran and other city officials said they could not raise taxes enough to close the gap, because the city already has the highest effective tax rate in the state. In addition, they said, further cuts in spending would endanger the city's 140,000 citizens, who already face a high crime rate.
On Aug. 1, the huge rejected Bridgeport's Chapter 9 petition on the ground that the $27 million in the city's general fund would allow Bridgeport to keep paying its bills at least through the end of the current fiscal year, and that the city's bankruptcy filing was therefore premature.
In addition to seeking to re-open those hearings to submit new evidence, the city has filed papers to appeal the Aug. 1 decision. If Judge Shiff believes that he missed valuable evidence during the July hearings, he would request that the U.S. District remand the case to him. The automatic stay would then go back into effect.
Much of the debate Thursday centered on the city's $27 million. Most of that money results from a 1989 bond issue to fund the city's accumulated deficit of $59 million.
The state argued that the cash cannot be counted as revenue to help the city close its $17 million gap. But the city said it has no other way to raise the money and is legally bound to balance its budget.
Ms. Brazzel-Massaro said that Bridgeport is doomed if it cannot use the money to balance its budget. "We'll always have $27 million in the bank, but we'll have no more taxpayers in the city of Bridgeport," she said.